Ksk Power Regulatory News (KSK)

26 November 2012

KSK Power Ventur plc("KSKPV" or the "Company")

Interim Results for the six months ended 30 September 2012

KSK Power Ventur plc (KSK.L), the power project company listed on the London Stock Exchange, with interests in multiple power plants and businesses across India, is pleased to announce the interim un-audited results for the six months ended 30 September 2012.

Financial Highlights

·; Group Revenue increased 9% to $198.62 m (H1 2011: $182.97m)

·; Gross Profit increased 28% to $70.33 m (H1 2011: $54.98m)

·; Operating Profit increased 33% to $58.30 m (H1 2011: $43.92m)

·; Profit before tax increased to $34.27 m (H1 2011: loss of $35.94m )

·; Investments in Property Plant and Equipment increased 16% to $3,118 m (Mar 2012: $2,686 m)

The underlying revenue growth of 30% at the rupee level has been strong and profitability for the period has been in line with management expectation given the current trading environment. However, the currency depreciation of the Indian Rupee against the US Dollar of c.20%, since September 2011, has led to reporting of more moderate revenue growth of 9% in US Dollar terms and the associated performance. This is illustrated in the table below.

Comparison of results

Operating Highlights

·; Operating capacity of 881 MW recorded an aggregate generation of 2,744 million units ("MU") as against 2,252 MU with operating capacity of 933 MW for the similar period in 2011, with the following individual Plant Load Factors ("PLF")

·; The 3,600 MW KSK Mahanadi power project is under construction with good progress being made

o Immediate focus and priority continues on the commissioning of the first two units of 600 MW each during 2013, along with the development of ancillary common infrastructure facilities, as well as the commencement of fuel supplies;

o Back charging of 400kV Switchyard completed in Aug-12 and Turbine Generator box up for the first unit was successfully completed in first week of November 2012 and the second unit, expected to be completed in the fourth quarter of FY2012-13.;

o Continued progress is being made on the balance of the four units of 600 MW each.

Commenting on the results, T.L.Sankar, Chairman of KSK said:

"The operational results are very satisfactory given the current challenging times and economic environment.

The period under consideration continues to be a difficult time for the power sector in India. The Group has continued its efforts to address the various challenges and continues to make good progress in the KSK Mahanadi project. As regards fuel arrangements for this large project, while pursuing and anticipating a suitable resolution of the Morga-II Coal block issue by the Government of India, the Group anticipates that in the immediate term fuel supplies from Tapering Linkage from Coal India as well as supplies from Gare Pelma will enable us to take forward the initially planned power generation from KSK Mahanadi.

In addition to the resolution of fuel supply issues through the interim and long term supply arrangements using a mix of appropriate sources, a major effort is now being required of the management to address various supply chain challenges with respect to operational assets and addressing on the ground challenges to synchronise planned generation with fuel supplies for construction assets.

We anticipate that despite these challenges in the Power sector and the continuing exchange rate volatility through the current year, that will create potential distortions to immediate term consolidated financials (as a result of accounting treatment with respect to translation differences of currencies), the underlying assets and associated performance will continue to meet expectations. We look forward to the years ahead as KSK emerges as one of the more stable players in the Indian power generation landscape."

For further information, please contact:

Key Business Updates

OPERATING POWER PLANTS

·; 540 MW WARDHA POWER COMPANY LIMITED (WPCL):

The total gross power generated in the plant during the review period stood at 1728 MU with an average Plant Load Factor (PLF) of 73%, notwithstanding the planned maintenance shut down during the period. Supplies of lower cost coal from cost plus linkage coal block has now commenced and the Company continues its efforts to optimize the supply chain to realise further cost savings, accompanied by the sale of power under open access, to improve plant utilization and the profit margins of the Company. The Company continues to pursue its earlier efforts on debt refinancing and expects to conclude them shortly, in the second half of the year, which should further enhance financial performance.

·; 135 MW VS LIGNITE POWER PRIVATE LIMITED (VSLP):

The total gross power generated in the plant during the review period stood at 420 MU with an average PLF of 71%. The PLF% for the first six months of the financial year 2012-13 has been on the lower side due to the outage during September 2012, but we are anticipating the uninterrupted efficient operation of the Plant in the latter half of the year, will enable annualized PLF at anticipated levels of 78%. The Company is continuing its efforts to secure appropriate legal reliefs with respect to tariffs from industrial customers. The Company anticipates that industrial customers, who have been experiencing extremely high alternate tariffs, will find our power plant supplies attractive and agree to our proposition.

·; 86 MW ARASMETA CAPTIVE POWER COMPANY PRIVATE LIMITED (ACPCPL):

The total gross power generated in the plant during the first half year stood at 168 MU with an average PLF of 44% primarily on account of the limited off take by Lafarge India. With the coal supply agreement for an additional 43 MW having been executed with Coal India's subsidiary South Eastern Coalfields Limited (SECL), the Company anticipates that increased consumption by Lafarge India will lead to the improved asset utilization, and the associated strengthening of revenue realization at the plant.

·; 58 MW SAI REGENCY POWER CORPORATION PRIVATE LIMITED (SRPCPL):

The total gross power generated in the plant during the review period stood at 227 MU with an average PLF of 89% in the combined cycle gas based power plant. With the continuous supply of gas and the efficient operation, the plant has provided an exceptional operational and financial performance and the Company expects this to continue in the future.

·; 43 MW SITAPURAM POWER LIMITED (SPL):

The total gross power generated in the plant during the first half of the year stood at 165 MU with an average PLF of 87%. Though the fuel cost for the review period has increased due to increases in coal prices from the Singareni Collieries Company, as well as from Open Market purchases. The entire energy generated in the period has been purchased by the captive consumers with the fuel cost increase being passed through to the captive customers.

·; 19 MW WIND ASSETS

These wind assets (nine Wind Turbine machines of 2.1 MW each) generated 37 MU with an average PLF of 44%, during the first half year of FY2012-13. Since the period under review accounts for the significant period of the production season (being the pre-monsoon and monsoon period) it is anticipated that annualised PLF for the full year will stabilize around mid-twenties.

CONSTRUCTION PROGRESS ON 3.6 GW KSK MAHANADI POWER PROJECT:

The construction activity of KSK Mahanadi, a large, single location, greenfield private power plant, is now in full swing, with more than 10,000 workers at the project site. As regards to the on-site construction progress:

·; Boiler drum lifting has been achieved for the initial three units of 600 MW each and it is anticipated that boiler light up for the first unit of 600 MW, on a test basis, will be achieved within the next 60 days and the boiler hydro test for the second unit is anticipated to be completed before the year end;

·; Turbine generator box up for the first unit was successfully completed in the first week of November 2012

·; Shell casting for both the chimneys is complete, with flue duct fabrication works and insertion completion is in progress;

·; Switch Yard and Transformer Yard is ready for operation, with back charging of 400kV Switchyard completed in August 2012;

·; Transmission system complete with necessary towers and one double circuit transmission line fully complete, with second line under advanced progress

·; The entire 60 km pipeline laying work for the water intake system for the power plant has been completed. The water reservoir inside the plant is completed,

·; The construction works for rail connectivity of the power plant to the Indian Rail network is at an advanced stage, with track linking in progress

CONSTRUCTION PROGRESS ON 10 MW SOLAR POWER PROJECT:

The Group continued its efforts in developing the 10 MW PV solar power generation plant in the state of Rajasthan under the Jawaharlal Nehru National Solar Mission, linked with a power purchase agreement for 25 years with the prescribed government agency. Significant progress has been made on the project. We have achieved debt tie-up, executed an EPC contract, started site preparation works and are anticipating completion of the plant construction in the next three to six months.

OUTLOOK

While the economic outlook in the short and medium term continues to be challenging and the government policy and decision making uncertainties continuing, the Indian economic growth potential and unfulfilled demand for power generation is expected to only continue and grow through the coming decade. KSK is well positioned in this regard and we expect significant unit commissioning in the coming year, as increased asset utilisation and lower cost fuel supply arrangements are implemented.

With an exciting portfolio of power assets and appropriate fuel arrangements secured, the Group has a strong and sustainable power generation portfolio.

An extract of the Interim Condensed Consolidated and Company Financial Statements for the six months ended 30 September 2012 is shown below. A full set of accounts is available from the Company website: www.kskplc.co.uk 

PRINCIPAL RISKS AND UNCERTAINITIES

The business of the Group is subject to a variety of risks and uncertainties which, if they occur may have a materially adverse effect on the Group's business or financial condition, results or future operations. The risks & uncertainties set out in this document are not exhaustive and there may be risks of which the Board is not aware or believes to be immaterial, which may, in the future, adversely affect the Group's business. The risks & uncertainties faced by the Group and the industry as a whole are provided in detail in the Annual Report of the Company for the year 2011-12. Majority of the risks identified in the Annual Report have not changed. while the Company attempts to address the same, the key risks & uncertainties continued to be faced by the Group are as follows:

o Delays in government decisions or implementation of earlier government decisions along with continual inconsistencies in government policies across any departments and any retrospective amendments to the existing policies or introduction of new policies

o Shortage of fuel and dependence on market based / imported fuel which are subject to the market vagaries and other uncertainties

o Economic slowdown and negative sectoral outlook with resultant impact on the banking sector delays in agreed project disbursements

o Delays in enforcement of contractual rights or legal remedies with government counter parties undertaking fuel supplies, power off take, transmission and open access amongst others

o Logistics bottlenecks and other infrastructure constraints of various agencies

o Challenges in development of support infrastructure for the power projects including physical hindrances and delay in issue of permits and clearances associated with land acquisitions

o Political and economic instability and global financial turmoil and resultant fiscal & monetary policies as well as currency depreciation resulting in increasing cost structures

DIRECTORS RESPONSIBILITIES IN RESPECT OF CONDENSED CONSOLIDATED INTERIM FINANCIAL REPORT

The directors are responsible for preparing the condensed consolidated interim financial statements in accordance with applicable law and regulations. In addition, the directors have elected to prepare the condensed consolidated interim financial statements in accordance with International Financial Reporting Standards.

The condensed consolidated interim financial statements are required to state of affairs of the Group and of the profit or loss of the Group for that period. In preparing condensed consolidated interim financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether they have been prepared in accordance with International Financial Reporting Standards; and

• prepare the condensed consolidated interim financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Group and to allow for the preparation of consolidated interim financial statements. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation governing the preparation and dissemination of financial statements may differ from one jurisdiction to another.

RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge

o The condensed set of interim consolidated financial statements have been prepared in accordance with International Accounting Standards 34, Interim Financial Reporting; and give a true and fair view of the assets, liabilities and profit of the group as a whole by DTR 4.2.4R

o The interim management report includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of interim consolidated financial statements; and a description of the principal risks & uncertainties for the remaining six months of the year.

o The interim management report includes a fair view of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein) that have materially affected the financial position or performance of the entity during that period

S.Kishore KA Sastry

Executive Director Executive Director

CONTENTS

INTERIM CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION

INTERIM CONSOLIDATED AND COMPANY INCOME STATEMENT

INTERIM CONSOLIDATED AND COMPANY STATEMENT OF COMPREHENSIVE INCOME

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

INTERIM COMPANY STATEMENT OF CHANGES IN EQUITY

INTERIM CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS

NOTES TO INTERIM CONDENSED CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS

INDEPENDENT REVIEW REPORT

INTERIM CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION

as at 30 September 2012

(All amount in thousands of US $, unless otherwise stated)

(See accompanying notes to the interim condensed Consolidated and Company financial statements)

Approved by the Board of Directors on 24 November 2012 and signed on behalf by:

S. Kishore K. A. Sastry

Executive Director Executive Director

INTERIM CONSOLIDATED AND COMPANY INCOME STATEMENT

for the six months ended 30 September 2012

(All amount in thousands of US $, unless otherwise stated)

(See accompanying notes to interim condensed Consolidated and Company financial statements)

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 September 2012

(All amount in thousands of US $, unless otherwise stated)

(See accompanying notes to interim condensed Consolidated and Company financial statements)

1 The group entities have arrangements of sharing of profits with its non-controlling share holders, through which the non controlling shareholders are entitled to a dividend of 0.01% of the face value of the equity share capital held and the same is also reflected in statement of comprehensive income. However, the non controlling interest disclosed in Statement of changes in equity is calculated in the proportion of the actual shareholding as at the reporting date.

INTERIM COMPANY STATEMENT OF CHANGES IN EQUITYfor the six months ended 30 September 2012

(All amount in thousands of US $, unless otherwise stated)

(See accompanying notes to interim condensed Consolidated and Company financial statements)

(See accompanying notes to the interim condensed Consolidated and Company financial statements)

NOTES TO INTERIM CONDENSED CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS

for the six months ended 30 September 2012

1. Corporate information

1.1. General information

KSK Power Ventur plc ('the Company' or 'KPVP' or 'KSK' or 'Parent'), a limited liability corporation, is the Group's parent Company and is incorporated and domiciled in the Isle of Man. The address of the Company's Registered Office, which is also principal place of business, is Fort Anne, Douglas, Isle of Man, IM1 5PD. The Company's equity shares are listed on the Standard List on the official list of the London Stock Exchange.

The financial statements were authorised for issue by the Board of Directors on 24 November 2012.

1.2. Statement of compliance /responsibility statement

a. the condensed set of financial statements contained in this document has been prepared in accordance with International Accounting Standard 34 ("IAS 34"), "Interim Financial Reporting";

b. the Interim management report contained in this document includes a fair review of the information required by the Financial Services Authority's Disclosure and Transparency Rules ("DTR") 4.2.7R (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year);

c. this document includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein);

d. the interim condensed consolidated and Company financial statements should be read in conjunction with the annual financial statements for the year ended 31 March 2012, which have been prepared in accordance with IFRSs.

e. The financial information set out in these financial statements does not constitute statutory accounts. The financial statement is unaudited but has been reviewed by KPMG Audit LLC and their report is set out at the end of this document.

1.3. Financial period

The interim condensed Consolidated and Company financial statements are for the six months ended 30 September 2012. The comparative information required by IAS 1 were determined using IAS 34 and include comparative information as follows:

1.4. Basis of preparation

These interim condensed Consolidated and Company financial statements have been prepared under International Financial Reporting Standards ("IFRS").

These interim condensed Consolidated and Company financial statements have been prepared on the historical cost convention and on an accrual basis, except for the following:

·; derivative financial instruments that are measured at fair value;

·; financial instruments that are designated as being at fair value through profit or loss account upon initial recognition are measured at fair value;

·; available-for-sale financial assets are measured at fair value;

·; employee defined benefit assets are recognised as the net total of the fair value of plan assets, plus unrecognised past service cost and unrecognised actuarial losses, less unrecognised actuarial gains and the present value of the defined benefit obligation

The financial statements of the Group and the Company have been presented in United States Dollars ('US $'), which is the presentation currency of the Company. All amounts have been presented in thousands, unless specified otherwise.

Balances represent consolidated amounts for the Group, unless otherwise stated.

The financial statements have been prepared on going concern basis which assumes the Group and the Company will have sufficient funds to continue its operational existence for the foreseeable future covering at least twelve months. Management forecast of group operations, especially as regards to 881 MW of operational capacities indicate sustained generation and associated revenue and profitabilities under current operating cost structures and that it will be able to meet its debt facility interest and repayment obligations. As regards the construction assets of 3600 MW and 10 MW respectively, the Management estimates are based on existing construction plans and that sufficient fund will be continue to be available as per financaing agreements for continuance of the projects construction. Given these the Group has assumed the going concern basis of preparation for these financial statements are appropriate.

.

2. Significant accounting judgements, estimates and assumptions

There have been no significant changes in the significant accounting judgments, estimates and assumptions applied for the purposes of the preparation of these interim condensed Consolidated and Company financial statements.

3. Property, plant and equipment, net

The property, plant and equipment of the Group comprise:

4. Investments and other financial assets

Impairment of financial assets

During the period ended 30 September 2012, available-for-sale financial asset of US $ 1,168 (31 March 2012: US $ 572) and loans and receivable of US $ Nil (31 March 2012: US $ 1,669) were collectively impaired.

5. Cash and short-term deposits

Cash and short-term deposits comprise of the following:

For the purpose of cash flow statement, cash and cash equivalent comprise:

1Include deposits pledged for availing credit facilities from banks and deposits with maturity term of three months and more.

6. Interest-bearing loans and borrowings

The interest-bearing loans and borrowings comprise of the following:

The interest-bearing loans and borrowings mature as follows:

7. Trade and other payables

Trade payables are non-interest bearing and are normally settled on 45 days terms.

§ Long-term trade payables are non-interest bearing and will be settled in 1-6 years.

§ Share application money represents application money paid by investor/customers for subscribing to equity/preference shares in subsidiaries as at the reporting date.

§ Interest payable is normally settled monthly throughout the financial year.

8. Segment information

The Group has adopted the "management approach" in identifying the operating segments as outlined in IFRS 8. Management has analysed the information that the chief operating decision maker reviews and concluded on the segment disclosure.

For management purposes, the Group is organised into business units based on their services and has two reportable operating segments as follows:

·; Power generating activities and

·; Project development activities

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the Consolidated financial statements. Group financing (including finance costs and finance income) and income taxes are managed on a Group basis and are not allocated to operating segments. There is only one geographical segment as all the operations and business is carried out in India.